21 Sep 2010

PNG pension fund urges action to cool economy

3:05 pm on 21 September 2010

The management of Papua New Guinea's main superannuation fund, Nasfund, says the government has to take action to stop the economy overheating.

In its newsletter, Nasfund points out that inflation is worse than official seven percent given for the current year and growing to close to 8 percent next year.

It says the inflation rate is measured by a basket of goods and services which don't reflect actual household spending.

The report says if a more representative basket was used the inflation figures would be much higher.

It also says whereas previously inflation was driven by commodity prices or exchange rate movement, the key factors now are wages and rental and property price increases.

It says this different dynamic means that to take the heat out of the economy, interest rates need to be higher.